In this episode I had the great pleasure of catching up on the global bioeconomy with Jim Lane, a global champion of the biobased economy with his daily publication The Digest and semi-annual ABLC events. Over the past 12 months, a lot has been happening in the bioeconomy, and we had the chance to catch up on Bold Goals, renewable fuels and feedstocks, among other things.
Our discussions opened around one of Jim’s keynote messages – it’s all about the feedstocks! While the energy transition is underway, we discuss the importance of molecules as part of the future energy mix. Jim reckons that accessibility to feedstocks, and not the conversion costs associated with process technologies, is the emerging bottleneck in scaling and acceleration the transition away from fossil resources. We touch on a range of current and emerging solutions including residues (which he sees as a significant pathway), cover crops and tree crops!
Jim introduced the ‘zoning problem’. He makes the observation that feedstocks are getting punished rather than producers acting in bad faith, and this is distorting the availability and social license of some options. He sees the greatest challenge in logistics, delivering densified, uniform, standardised raw materials to refinery operations and we explored whether biomass gasification should / could be a pathway solving these challenges.
While Sustainable Aviation Fuel has drawn a lot of the headlines over the past few years, we explored the rising demand from the marine sector – from Jet Zero to Wet Zero. We touch on the greater optionality that the marine sector has for liquid fuel solutions. And with Jet and Wet discussed, we move onto Debt Zero and the need for financing to get the first of kind and next of kind plants up to scale to drive returns and lower risk for the industry.
im and I then explore some of the broader challenges in the bioeconomy, specifically the marketing challenge that the industry has around positioning with consumers to drive uptake of products. We have a little Don Draper reflection, around changing the conversation and Jim makes the excellent observation that shaming customers really doesn’t work! Marketing also gets some further discussion as we reflect on alternative protein and cellular agriculture.
We close out our conversation reflecting on the Bold Goals initiative (which started 12 months ago) and talk of the 10-billion-ton study. Jim closes out with the acronym of the year – as nobody does it like Sara Lee!
Transcript
CB: Hello everyone, and welcome to Tech Transfer Talk. My name is Cameron Begley, Managing Director of Spiegare, and rejoining me for what is his annual – given now it’s his second visit to us – discussion around the biobased economy and all things tech transfer within it, is Jim Lane. Jim, hello.
JL: It’s great to be back here, Cameron. It’s always a nice thing when you’re allowed to come the second time. Of course. I think it’s really the third time that, you’re sure.
CB: It may well be. It turned out you were really liked in in northern Europe last year after you joined us. We had quite a bit of interest from Scandinavia. It was it was a great thing, actually, most unexpected and very pleasant.
JL: Of course, you know, this time of year it’s very dark in Scandinavia. They don’t have a lot to do.
CB: Oh, thanks mate.
JL: …Long evenings. Yeah, yeah, yeah. Six hours, six-hour days. They should be listening to it because throughout the year, because you have a wide variety of, of amazing guests and many of whom you and I both know.
CB: Yeah. Thank you very much, Jim. Yes, they should. And interestingly, from the very big skies of Scandinavia and the Arctic, was your comment about Skyfill and the implications of Skyfill? I don’t think we’re any better any further progressed in in addressing the Skyfill issue just yet.
JL: Well, we have a lot of sky to fill and it’s getting pretty darn crowded up there. But there’s, you know, more stuff we’re stuffing up there every day. Our numbers on terms of measuring us on climate change are going the wrong direction is, I think, you know, famously we all know. But that has a lot to do, not just with the ideas of reducing carbon intensity across developed nations, but it’s really the developing nations. And we probably have to address, at some point, what we think from a point of view of energy justice, what’s fair? I mean, why shouldn’t the whole world have running water and why shouldn’t they have more than a three stone fire to cook their meal? And of course, it’s difficult to map out the energy demand against our climate needs. And that’s against that kind of 8 billion people having a, you know, a very high energy intensive lifestyle. And that’s why the shift to renewables isn’t just about a shift, it’s just about producing a lot more.
CB: Yeah. And it’s interesting. Yeah. The energy justice issue is a very live conversation and a bit of a wicked problem, but one that needs resolution. And it brings me back to something else you said last year, Jim, which caught the imagination of a few folks, where we got into a bit of a discussion about renewable energy choices. Whether it was wind, solar, and then in the fuel side, whether it was hydrogen or renewable diesel or whatever it happened to be. And you made a really interesting observation that I was contending, well, the engineering and the thermodynamics should take you in a certain direction and you quite reasonably put back to us and said, yeah, but consumers will choose what they want to choose, and we have to choose the things that meet consumer needs, as well as what might fit the planetary needs and what might fit the engineering requirements. And it was an interesting sort of, different take on it because consumers of energy need different things from those that don’t have energy to those that run, you know, (Ford) F-150s.
JL: Well, absolutely. If you imagine a world where everything was done in the most efficient basis whatsoever, we’d all eat in the big lunchroom, no one would eat at home and no one would go to a restaurant. What kind of a world would that be? So, we have to let choice go where it does. And hopefully what people do is, we need to decarbonise in all directions to make sure that we are not ending up in a bucket of consumer choice that leads us toa planet that’s so warm and so difficult, a trough that we can’t get out of. But that’s why we need more choices. It’s not just about more productive. It’s about we need more choices. We need all these things to come on the table. And we need to have a robust conversation about what is, a better path and what is more realistic and what is more affordable – in the near-term as well as the long-term, because we often have conversations about what’s happening next year, and then we have conversations about what’s happening 100 years from now. But we don’t always do a good job of thinking about 10-15 years in advance.
CB: No, we’re not. And I think there’s a little bit of that short-termism, I would contend, is a little bit of the political cycle that we all live in, certainly in democratic, um, uh, in democratic systems where they, you know, 3 or 4 or 5 years is the cadence and social media, you know, 15 minutes seems like an awfully long time, doesn’t it?
JL: Especially if you’re the parent of three-year-olds. 15 minutes seems an awful long time. So, it’s the human cycle as well.
CB: Yeah, absolutely.
JL: We do tend to think in very short time frames, and we make very short-term choices. We probably need to learn in the long term to makebetter choices for the long term. But that’s a big project. We’ve been working on that for 10,000 years. Progress has been slow.
CB: Yeah. Indeed. And talking of things for the long term, ABLC in October. Your State of the Union address, if I can call it that, on the Wednesday evening, opened with a slide that, I must admit, warmed my heart. It’s all about the feedstocks, and it’s a long-term thing to solve.
JL: Yeah, it’s it really has been, um, increasingly about the feedstocks. Because if you look at the numbers, and it doesn’t really matter what technology you’re looking at, you could be looking at anything from the biotechnology side over, you know, the molecule side over to the electron side. Ultimately, why we like wind and solar is because we have this free feedstock. It’s a little bit of a stop-start, and we do need to fill in the gaps. And, you know, on the electron side, but we have far more broad and varied needs on the molecule side. And absolutely, the whole key, if you look at the cost, the big problem is not getting the cost of technology to process these things down. We’ve seen in solar and wind how fast things come down once we have put our minds to it and achieve economies of scale. What the big problem we have is that pesky cost of feedstock. And that can be very persistent and actually rises over time. You know, whether it’s petroleum or anything else, just tends to cost more over time. And it’s very hard to shake that cost out of the system. And that’s why we have to turn to residues. And that was really the message. If feedstocks are the problem, residues are the answer. Because cover crops are very nice to intermediates, but our primary crops are being used mostly, and so there’s only so much we can expect – 1 or 2% yield gains on productivity, and there’s only so much semi marginal land that’s going to be available in the long term. So that means we have to turn to waste materials. So it’s kind of the message coming out of it was pretty broadly accepted.
CB: Yeah. And so, the use of those residues I’ll come to shortly. But those residues themselves, they tend to be not very densified and not very uniform. So, how do we get either technology that meets the residues where they are to densify them, or how do we get more value into the residues? That strikes me as part of the challenge here.
JL: Well, there’s, that’s a two-parter. One is the uniformity, and one is the densification. I’d answer the densification this way. If you were to look at our current energy mix and you were to plot on the face of the earth where the refineries are, you would see a very small number of oil and gas refineries. You’d see a very small number of places that produce power. It’s kind of, you know, very densified. But if you actually looked at oil and gas from the point of view of where it was produced, the actual well, you would find that’s not very densified either. Those oil wells are not necessarily very close to the ultimate refinery where they’re going to be refined. And so that’s, we have to look at the densification as a problem of learning to move it and building the infrastructure to move it. Where would we be without having built rail, without having built canals, without building roads? We had to build those things. Because if you look at the Australian countryside, you couldn’t have moved anything 160, 170 years ago. So, now that leads us to the second problem, which is which is the more difficult one in the short term, which is the uniformity, because that that is a problem. And we have to be able to reduce this to a uniform feedstock standard, and it has to be something that you can have a spec and there may be 2 or 3 items, but we’ve seen plant after plant try to do that conversion and refining to make it something usable at the plant level. And that’s really, really difficult to do. So. having it produced to a standard, get it dried, get it chopped with a crumbler technology, you know, takes it down to a very uniform size. It’s a project out of Washington state in the United States. Crumbler technology. Some guys working on that and very good company and Forest Concepts is the company. So, there are ways to do this. But we do have totackle that and we have to tackle that urgently to get them the same size and to get them dried. And I’ve always said, you know, just me personally, I’ve always felt that the, the answer is to gasify everything and move methane. It’s in gas. Much easier to do than to try to move very heavy solids. And gas is easier to move. You can do it with anaerobic digestion. You can do it with, you know, it’s not going to be practical to havegasification at the, let’s say, the farm level. But you can certainly have anaerobic digestion. They do this in Germany, and they do it at a regional level. So, I think methane. Methane to me or methane plus CO2, that sort of biogas substrate, I think that, you know, we think of as a product, but I think it might well be the intermediate of the future.
CB: Yeah. And it’s interesting you raised gasification there because when I think about feedstock, there are two other buckets just to quickly touch on. You know, that we very much focused on the residue piece. One bucket is, in fact, biogenic, CO2, waste CO, which is which is the LanzaTech approach, amongst others. Do you see you see a future there for capturing that biogenic carbon coming off fermentation? This came up a bit at ABLC too. – a capture and storage facility to drive down carbon intensity. Do you see CO2 as an enabling feedstock over the future or – because it’s not a very energetically favourable molecule?
JL: The question is, in that case, since you’re using something, as you say, energetically unfavorable, CO2 is the driver of biomass today. But you have to get plants, you got to get plants to do the work. And because they’re going to have the low cost, if you will, refining technology to get that turned into a sugar or some other, you know, carbohydrate or some other molecule that you can deal with lignin, whatever it is they’re going into. So, I think if, if we’re going to use CO2, we’d better be using plants. And if we’re going to use CO2 and capture it, the question then becomes what do you do with it locally, short of trying to find this really energy intensive way to split the molecule and, you know, make carbon black and then release the oxygen, I don’t think it’s going to pencil out anytime real soon. On the economics of doing, the energy of doing that.
CB: To go back to that other feedstock, though, it’s fats, oils and greases, which I’ve always sensed that in perfect universe, if there was an infinite amount, all of our problems would go away from a processing and refinery economics perspective, because it just sort of almost drops in and away we go. How do we, if you could get more of it, would we use more of it?
JL: Well, I think we would. The question is, how much is out there? We know that, I think that the figure I’ve heard is that China recycles approximately 20% or less of its fats, oils and greases. So, we have a recycling challenge there. We’ve got to make it more circular. Now, we have to do a lot of things more circular. We have to do that with plastics as well. But one of the things that we do is we have this sort of one-and-done approach to our economy that probably makes sense on the economics, and so, we probably have to address that in other ways or hope that the economics change. But if we were to acquire all the waste fats, oils, and greases, and we could recycle those, you know, pretty quickly, I think you’d find that there would be a lot more we’d have a lot fewer near-term problems because, as you said, it’s a really good feedstock for making drop in lots of fuels and diesel and jet and that kind of thing. Yeah, it’s a big opportunity and it’s a collection. It’s a collection problem.
CB: There’s been a little bit of a flurry over the last, you know, 6 to 12 months around, you know, revisiting tree crops – pongamia has been getting a run recently. Macuba, I mean, 15 years ago, there was the Jatropha Witnesses that came through with their tree crop. Where are the new crop options there Jim,? Do you think, or do you think that they’re at the margins of this feedstock conversation rather than moving the needle substantially?
JL: I don’t think it’s at the margins at all. It’s a question of how much you’re going to grow. The – let’s just take pongamia, which is a pretty, it’s an excellent tree and it’s grown extensively in Australia. It’s sort of a semi native. And there’s some trials of growing it in, in more industrially up in Queensland etcetra. So, there’s, you know, there’s hope for it. The, the reason we want even to have the conversation about pongamia is because we have demonised palm. Palm is a tree. Palm is a little seed-bearing tree, and it grows perfectly well, and we know perfectly well how to utilise it. The problem that we have is not a palm problem. We have a zoning problem. We are addicted to bad zoning laws and that’s a worldwide problem. We build the wrong things next to the wrong things, and we allow too many folk in too many parts of the world to, let’s say, grow something in an irresponsible manner. But what do we do? We don’t punish the owner; we punish the feedstock. That’s crazy. That’s like, you know..
CB: That’s an interesting way of framing it.
JL: That’s bashing the tool rather than bashing the person who is utilising the tool. And there’s nothing wrong with a hammer. And you would never ban a hammer because somebody used it to bash somebody’s head in. As terrible as it is, you know that you would never want that. But you go when somebody does that, you go after the person, you don’t go after the, you go after the person. So, I think we’re going after the wrong thing and it’s, it’s very regrettable. But having said that we’re doing that we’re now turned to alternatives that are, uh, tree bearing oilseeds such as pongamia. Now pongamia is perfectly a good thing. It grows in some more marginal areas than, let’s say, palm. And so, it has, you know, I think even if palm were to make a recovery, it has a great story and should and we also have some other, uh, sort of row crop bush oil seeds like jatropha. You know, again, I think that what we need to be solving is, stop demonising feedstocks because people are using them badly and use them responsibly, there’s plenty of places to grow palm. And to grow it sustainably. It doesn’t have to be all tearing down rainforest. And so, we just need to get back to using palm I think is one of our problems. But we’ve got, as I said, we’ve got a discussion problem, and we do not have ourselves aligned.
CB: Yeah. Fascinating. Think about a fascinating way of looking at it. Fascinating way of looking at it, Jim. There is, in the immortal words of Ben Kenobi, there is another, and that is the biomass oil technology that CSIRO developed many years ago that allows you to co-express the oil in the vegetative tissues. So, we’ll wait and see what comes of that.
JL: Yeah, we ought to be investing in that heavily. You know, let’s use technology where we can if we can do things on… There’s a company that’s called Zero Acre Farms and it’s not the same. It’s not a similar technology, but it has a similar idea, which is let’s grow oil in a, in a much smaller footprint in a lab setting, using inputs that are less in competitive demand, all that kind of thing. Those are all really good ideas. They’re kind of long term. And we have to have a robust R&D program. Besides, because we do need the technologies of 20 years from now, because you and I have probably been doing this for 20 years. So, we know, you know, we need them now. I wish I wish we had, you know, doing the investments 20 years ago.
CB: Yeah, the best time to invest in this stuff was in fact 20 years ago. The next best time is today or tomorrow.
JL: Exactly. You’ve, you’ve taken my, my next banner off the headline of the Digest.
CB: So, with lignocellulosics in the frame, there was a lot of talk at ABLC around ethanol-to-jet-to renewable diesel, and renewable fuels. And there’s been jet zero and SAF has had the headlines, I think, for the last 2 or 3 years. But what struck me at ABLC, Jim, was we moved from jet zero to wet zero. The marine guys are coming very strongly for these renewable fuels and seem to be really strongly focused on, on their emissions reduction right around the world.
JL: Yeah. The IMO has passed, which is an industry organisation, has passed a voluntary standard that is very ambitious and the number of, quite a number of the big shippers, Maersk among them, have taken it pretty seriously, taken it apart. And they are working real hard, and they’ve got a couple of different options that, perhaps or a wider array of options than perhaps aviation has. So, they can look at fuel cells, they can get, you know, sort of methanol-based transportation. They can look at bio-LPG as well as renewable marine diesel. So, they’ve got a little bit of a sorting out to do on the technologies that are really going to work out and be the dominant ones. We’re going to see a couple competing for a while, but it’s welcome to see the seriousness. It’s not that airlines are not serious about switching. But they have, they have a green preference. There’s no green premium for the industry. We have started to see a call, Aaron Robinson of International Airlines Group, that’s British Airways and Iberia has called and some others are calling for an international mandate because what they are concerned about is not so much that passengers will not accept SAF, but that the early adopters, if they go deep into SAF, will be in a bad competitive position against those who, you know, set lofty goals and then ignore them. And so, you know, we might see some action there on the aviation side. But aviation remains a millions of gallons, millions of litres rather than billions of litres. And it should be further along. The reason has nothing to do with anything except for the price of fuel and the fear, that at that price, people will stop flying. If you were to do 80% of your fuel from, you know, and that keeps the capacity from being built, so you end up with a chicken and the egg problem.
CB: Yeah. that’s really interesting, Jim. So, your contention here is that it’s the concern about being uncompetitive as an early mover or an early buyer of stuff. It’s not a feedstock problem per se. It’s not a refining capacity problem per se. It’s not a, you know, being able to make a fuel that is on specification. It is this early mover disadvantage. That’s the big barrier that you see right there.
JL: Yeah. And it comes down to being a marketing problem, really. The bio economy as a whole suffers from a massive, massive marketing challenge. Now, I’ll give you a story. When I was back in the, working and still in media, but in more on the fashion side, I remember a story once, an executive from Levi Strauss, you know, the guys who make the jeans, was musing with me one day and she was very unhappy. And I said, why are you unhappy? And she said, because we figured out that there’s a market for a $700 pair of jeans, and I can’t figure out how to put enough cost into it to justify that price point. So, she was looking at sewing in Swarovski crystals, you know, a little, you know, fake diamonds into the, into the jeans and just anything she could think of to get the cost up because they had found a much higher price level where people were going to demand the jeans. Now, that’s a small market, but you can imagine that’s not a conversation we ever have in the bio economy. No one ever says, “Hey, there’s a person out there willing to pay, you know, three times the market price of some commodity. And gee, what can we do to make that? What can we do to make the fuel or the material more expensive?’ Because we already have that. We already have that problem and that’s to go renewable. Yeah, yeah, we got we got that solved. But we don’t have we haven’t solved the other problem, which is how to create that robust demand. And it’s something that, if you if you think about the days before, I mean smartphone as an idea was around for a long, long time and there were smartphones if you remember, Palm technology was finding its way into homes. There was Motorola had a, had a rocker and a razor and, you know, different types of ways to go about the smartphone. Now, here’s a product that, I don’t know how much is actually in the parts, but I’m going to suspect that it’s something less than $50 or in the parts of, let’s say, your traditional, you know, big, you know, smartphone these days, an iPhone or whatever. And sometimes they sell for $900,000. So, you know, 15, 20 times the actual cost. What’s the difference? Now, if you remember back 25 years ago, phones were a commodity and the price was coming down and everybody was, you know, trying to figure out how to make phones cheaper and cheaper and cheaper and cheaper. And it was becoming that commodity environment. They changed that through marketing. And that’s what we need to do as well, because it’s how people allocate their money that they spend on their life. Right now, they think, okay, I can just buy- because they think of it as a commodity. It’s like a light bulb or electricity or whatever it is. They don’t think of it as a value-added product, and they want to spend as little on it as humanly possible, and that creates that downward pressure on price. The other problem that the bio economy suffers from is it’s addicted to intermediates. Everyone wants to make an intermediate. Nobody wants to make a finished product and go out marketing. The consumer. I, I have sat in front of, I don’t know how many people begging them, build a gas station, build a petrol station and, of the future and go and market. Learn how to market these fuels at the higher price and get people to be believers. And everyone knows that you pay a lot more at Starbucks than you do at McDonald’s. For, you know, for Maccas for the coffee. What’s the difference? It’s still coffee and it’s all about marketing.
CB: I could argue with you over whether it’s still coffee, but that’s not the key conversation today. So what strikes me here? This is a Don Draper moment. If you don’t like the conversation, change it. And what your call to arms here is: Change the conversation from intermediates or from commodities to put a vertically integrated, differentiated product as opposed to an intermediate or a feedstock or a, you know, or a starting material and build, build, build the whole thing.
JL: I think one thing we’ve learned about climate attributes, carbon attributes, is shame does not work as a marketing tactic.. with consumers ;it works with governments. And sometimes does, it does. But that’s, you know, not the right conversation. In the end it’s the consumer that has to learn to part with a higher percentage of their hard-earned incomes, have to be purposed towards just funding, you know, the basics of a sustainable life. And it means for them, they’re going to take one less cruise or one less, you know, nice vacation or some other, item of value will not be there for them, and they think they can avoid that choice. They see that as a false choice. They don’t see that they have to make that choice. They can have all their Western lifestyle baubles and still have a planet at the end of it. They haven’t done the math, I guess, and but we haven’t helped them, have we? By not having, we’re better at selling potato chips and things that are bad for us than we are at selling things that are good for us. And we ought to learn, some of our best minds ought to get off selling sugar water and, you know, with carbonation in it, and get on to selling the things that perhaps matter more in the long term to the planet.
CB: That’s a great marketing challenge you’ve described there, Jim. We talked about Jet and Wet Zero earlier, but something else I picked up at ABLC was the debt and financing challenges. And there were some great announcements that have come out recently with Gevo getting backing for their ethanol jet.,I think it is. And there was another announcement that escaped my mind at the moment. Similarly, debt financing.
JL: Montana Renewables.
CB: Montana Renewables. Thank you. Yeah, big stories there. But they are the small part of the iceberg that’s got above the waterline with some oxygen. Everyone else is underneath it, kind of drowning at the moment. How do we enable more finance to move into this part of the economy?
JL: Well, you have to show people a path to profitability. And when it’s advanced, high-risk technology, debt is really hard to justify because the nature of debt requires 3% to 5% failure rates. That’s kind of what a standard commercial operator would be, trying to avoid 5%. They’d like to be 0%, but they’ll accept up to, let’s say, 5% in, let’s say, consumer markets like mortgages. And they know that ,that percentage will go into default. They seize the asset and sell it for what they can. Now we have two problems in the bio economy. First of all, when you seize an asset and sell it, it’s not like a home which you can sell for 80% or 70% of its value. It’s worth, you know, scrap iron value. So, the price of failure is much higher. And so, we need a lower risk than even consumer, you know, home finance, maybe 3%. Now who’s going to be able to bring advanced technology forward, that is going to be less risky than the current technology that is. That’s just illogical. That’s where loan guarantees come in, because what we’re supposed to have is, is we’re supposed to be able to socialise the risk rather than privatising the risk. Right now, we’ve privatised the gains, but we’ve privatized the risk. And the private sector is just unwilling to take that kind of risk. They see 10-15% failure rates and would be what they were expecting. And they’re, you know, expected to provide debt at a much lower interest rate. And they can’t make money. So, we have to buy down that risk until we have much more stable technology and stable policy, where they can see the capital will come in when the market is ready. It’s like the old Chinese Confucius proverb: when the student is ready, the teacher arrives. And the market is not ready. And we have not readied the market, but it’s two ends. It’s the stability of the policy. So, they can see that that market is going to grow because it, it has to be done through policy because we’re not people aren’t going to go out and buy, you know, carbon credits as an individual, it has to be done through policy. And then you are going to have to also just buy down that, that short term debt rate. That’s where loan guarantees come in. We are not doing anywhere near the kind of volume, and that is a due diligence problem. Amongst other things, it takes too long to study a project. And they might, they might have… I remember speaking with a head of- short anecdote- head of finance, corporate finance at sustainability finance at Wells Fargo. A couple of years ago, we were at NREL together and he said the biggest problem, biggest fear he had about the future of the world was that there were not enough due diligence professionals available, engineers who could do the work, to do it quickly enough to write the paper to back the kind of volume that is necessary. These are not even though we say they’re cookie cutter. Even wind and solar you have to look at, even though the technology is established, you have to look at the wind curves. You have to look at location siting. You have to make sure the policies in place, the incentives are, are, etc., etc., etc. So, you can see, that’s a problem and we need to have trillions of dollars come onto the market, not billions of dollars. And so, 3 billion is welcome, but we need a thousand x of what we’re spending right now.
CB: This is really interesting, this due diligence bottleneck. Do you, would you suggest or agree with the notion that there is an appetite to get these loan guarantees in place, but we can’t get that due diligence done? Or is it that there’s just not enough things getting through due diligence., and there’s a small number at the moment from a bioeconomy perspective, not so much solar and wind.
JL: Well, I think you buy your way out of a bottleneck. And so, what? You know, yes, we’re guaranteeing the loans, but the loan guarantee structure, I think, aims for a target of 3% failure rate. Well, that’s the commercial failure rate. So, you know, you’re going through an extra layer of due diligence and very painful due diligence, because governments don’t like to make loans to projects that fail.
CB: No one does.
JL: It’s very, very bad. Yeah, well, no one does, but particularly political figures don’t like to make, you know, sort of government giveaway type things that they tend to be politically demonised, etc. And you hear far more about the Department of Energy has a, the United States has a 97% success rate. It’s actually better than almost any commercial bank in the United States. But all you ever hear about is their failures.
CB: The 3%.
JL: And over on the commercial side, you hear about, so, you hear about the successes. So, what you need to do is you need to create an intermediate that is going to be incentivised to take that risk on, you know, if the government cannot afford to take this for political reasons, what the government needs to do is, is create a risk taking through its funding authority. It needs to create a risk-taking class of investors who will buy very large amounts of debt on very fast turnaround. So, imagine if you were in the housing market and you said, I need to buy all these houses in a day. Well, somebody’s going to have to take on that boatload of risk because you’re not done the home inspection. So, but you know that a percentage of, what you have to do is estimate some percentage of them will fail. And I won’t know about it, but I just have to be able to price that in. So, that’s the risk authority that we don’t have right now, which is someone who is a risk-taking acceleration authority. So, we have people that will take risk to slow. What they need to be able to do is backstop organisations that are willing to move quickly and take larger amounts of risk because of that, because there’s the risk you take because of the project, and there’s the risk you take because you didn’t take enough time in the due diligence. And those are two separate pieces of risk. We do a pretty good job on the first one, but companies are waiting. I think some companies are waiting two, three, four, five years to get a loan guarantee. They’re running burn rates sometimes three, four million dollars a month to keep the company afloat. If you were to just take that example now, I’m just pulling a number out of the hat, but let’s say that’s $4 million, right? You know, X a quarter, let’s say 4 million bucks a quarter. That’s $12 million a year. If you had to wait four years, that’s $50 million. Now you multiply that by a thousand projects, and you have $50 billion of risk that you’ve just introduced into your economy through sloth. And so, we need, the need is for speed. We all know that the problem speed is that if you’re driving too fast, you’re going to crash more often. So, what you have to do is have an authority that is backstopping that additional, providing the, you know, collision insurance, if you will.
CB: Yeah. What you just pointed to there, Jim, is we talk about renewables today and bio economy. You’ve just identified the one absolutely non-renewable resource which is time. And we’re burning it up waiting for things to happen, as you’ve just described.
JL: Yeah, we’re waiting for the perfect or waiting for something that is reasonably good or affordable at current rates. We’re running, I mean, to say we’re running out of time is something is a fairy tale that we tell ourselves. I mean, we’re long past out of time, and we are now looking at just limiting the consequences. The barbarians are not just at the gate; the barbarians are in the street. They’re through the gate and they are knocking down the buildings.
CB: One of the things we didn’t touch on last year, Jim, and we mentioned it just as we were rolling out through the credits, was alternative protein and cellular ag, and it was all the rage for, you know, the last 3 or 4 years, I think alternative protein plant proteins has come up over the hopium curve and come down the other side. And cellular ag is making its move through that similar trajectory, I’d argue. What are you seeing from your vantage point? We’ve had a big talk about renewable fuels and things. What about the food for thought that we need to leave with our listeners?
JL: Well, let’s start with alternative protein. So, one of the, one of the big things and exciting things about that market is we’re getting pretty good. And we’ve become increasingly good at making it from syngas. So now we’re talking about single cell protein. But that can be fed to cattle. Now syngas, you know there’s two ways to look at this. And let’s think of this as good news. First of all, it is very valuable as let’s say cattle feed to feed, you know, uh, farm animals. So that takes pressure off the crop and the crop lands because that’s actually where we get those. We usually feed them grain. So, you can supplement very safely and, and it’s nutritious and so on and so forth. So, you’re able to take a lot of pressure off your global agricultural thing by making alternative protein from syngas. I think right now the first wave was making it from sugar. So, it, it didn’t really it, it kind of gave us a vegan food but for, vegans weren’t calling for it and it gave us a healthier food. But you know, we’re not necessarily screaming around looking for healthier diets by substituting impossible burgers for…a lot of people just say, I’m going to stop eating burgers instead of eating, you know, the Impossible Burger instead of a standard one? Um, but this one really does solve a problem because it gets it off syngas. Now, the other thing that’s kind of interesting about it, we did talk about this a bit at ABLC was if you think about it, what can you make…you can make syngas from anything. Which is to say that now it’s not just about food versus fuel in the old traditional way. It was like you could make food or you could make fuel. Now you can make food from every single thing that is biomass. And therefore, if you, cannot any longer, it kind of solves our food versus fuel dilemma, because you can no longer have a case where you…well, yeah, because anything can, you can make anything from anything. And that’s what’s really great about it, that syngas can be used to make fuel, it can be used to make food. If you’re going to demonise, let’s say, corn, you know, maize for being a food crop or soybean, saying, well, that has to be sequestered. You can’t use it to make anything else a material or so on and so forth. Well, then you have to say, okay, well, intellectually, you’d have to apply the same thing to anything you could use to make syngas, which would be anything. You couldn’t use garbage to make fuel or materials because you can make food from it.
CB: Jim, it comes back to this point you made earlier about demonising the feedstock. We get tangled up in demonising the feedstock rather than thinking about what’s the best solution for the particular problem or challenge we’re trying to solve.
JL: Well, also, what I mentioned a little bit earlier is we have a zoning problem. We have this perfectly good idea, which is called zoning laws. Let’s zone. You know, we don’t put nuclear reactors next to primary schools for a very good reason. It doesn’t mean that energy technology is bad, or schools are bad. It just means don’t put them next to each other. Zoning laws are the proper way to handle all these problems. And we make our choices, and we say, you know, we’re going to have a sequestered area that is used for this purpose. We have national parks. We have all kinds of reserved areas. We just need to do a better job of zoning like we do with national parks. Those are a wonderful thing. And that’s, you know, sequestered them for a better purpose for all time. And if we had better zoning, we wouldn’t have any of these debates.
CB: Yeah. No, no, there’s that issue of feedstock and zoning again. But you, you mentioned so the syngas route is one pathway that’s urged in the alternative protein discussion market. Is there a market there to be, so, you mentioned cattle feed which is a market to be served. But from a consumer perspective it seems that the alt protein pieces, it’s lost its intensity. Certainly, in the meat side of it. I think the alt protein dairy side is actually a pretty strong and robust market, holding a small but notable share. But the alternative meat bits disappeared, and the cellular ag bit seems to be servicing a very, very niche market.
JL: Yeah, they stop growing. They’re good ideas and they’re good technologies. They’ve just stopped growing. They’ve stopped growing a little bit sooner than a lot of people who were investing in them hoped. And they’ve just reached a plateau. There’s a certain amount of demand for it. They’re not able to raise that. And the days of having the excitement over such and such a consumer protein, did not, that excitement support a lot of investment? But it was all about investment. And I think there were at 1.500 different food protein companies. I heard this from an investor, Roger Wyse, and he said one of the problems I had, he had was he had 500 companies to look at, and it was just impossible at one point. And not to coin a phrase. And because he turned, he actually overlooked Impossible Foods and went into some other things which he made a lot of money out of. So, good for him. But the, t the problem that we have is we had too many companies. And there really wasn’t a lot of reason to do it. This was a, this was a solution chasing a problem. And we do a little bit too much of leading with technology rather than leading with customer pain and consumer demand. Were people crying out, were vegans crying out to be able to eat meat, faux meat? No, they weren’t. And nobody was crying out for these technologies. They’re cool and they do. They have achieved a market and well done them. It’s hard to do. But they’ve reached their limit at this point. And the next phase goes back to another thing we’ve been talking about, which is effective marketing. Drop your solution. You cannot shame them into it. You cannot, you know, wag your finger and say, oh, you’re hurting the planet with your current..that’s, you know, shaming your customer is a terrible way to do business. And it’s never worked. And but we tried all the time. We can’t…in the bio economy. We can’t help ourselves.
CB: I wanted just to touch on the bold goals conversation, Jim, because for those that don’t know, I’m part of that Bold Goals initiative and very kindly had the privilege of talking about it at ABLC with the team. Jim, you made a bit of a call to arms, and it was fantastic to listen to, but I would like to invite you to make the case again for getting involved, like explaining what it is and getting involved because it was pretty compelling sitting in the room. But maybe that’s because I’m inherently biased towards agreeing with you on this point.
JL: Well, we’ll go back. Two years ago, there was an executive order out of the United States White House, President Biden, and it had to do with accelerating biotechnology as a new opportunity for advancement of, in this case, the US economy. By shifting to new technologies, we not only would do better, but we do well. And there were a series of bold goals that were issued by the very high aspiration, and a group emerged shortly afterwards, to realising that in order to reach bold goals, which is very nice to set goals,you need bold actions. So, a group of around 100 volunteers at various companies around, and there’s a steering committee of five which, which you honourably serve, and God bless you for doing so. People around the world that, take time out as volunteers to do this who have developed this group, a list of bold actions that we have to take now, these bold the pitches, this these bold actions, while bold, are necessary without these actions being achieved. And if you read them, you’ll see how obvious they are, such as driving adoption of climate smart technologies to enhance soil carbon sequestration. Who is against soil carbon sequestration and other bold action was to do an inventory of biomass around the world, so we know how much we have to use. Now, that doesn’t seem like so hard to do, in the sense of getting on board with. It’s something has to be measured and achieved, but everyone can get behind every single one of these bold actions. And what I said at ABLC is that often we think of these volunteer opportunities, and we think, well, I can do this, or I could do nothing. And what I said is, if you do nothing, if you read these actions, you will realise if we don’t achieve them, there won’t be a bio economy. People will just move on other solutions. So, I said, you know, don’t do it. That is, get active because you think that you believe in, you know, every single thing and you just want to be a do-gooder. That’s good. But do it because you won’t have a job. And, you know, you’ll have to find…and there won’t be another company down the street to get a job at if these goals are not addressed now. There will always be a pharma sector, I think, because pharma has a way of charging thousands or hundreds of dollars for a pound of material and, or per kilo, you know, sometimes thousands of dollars per kilos. So, the uplift from a 16 cent sugar is, is so high that they don’t have to worry about, you know, margins, they have to worry about the technology working. But there’s a limit to pharma. You know, there’s only so many medicines that we need., right, and so, there’s a limit to that. If we’re going to have a robust bio economy and have people who live in rural areas, who like to live in rural areas have a means of making a living and being competitive, then I encourage everyone to join the Bold Goals Action Group to help make sure that these bold actions are taken so that bold goals can be achieved. Without that, it’s not just a question of climate change, it’s a question of will there be a new seed type company in the future? Why would there be if there’s no particular, you know, demand, not saying new seed in particular, but I know I use that as an example because companies like sustainable oils that work on crop, they’re active in these kinds of things because they recognise that they’re invested in, and their success is tied to, the success of the bioeconomy. So, that’s the pitch there. It’s not just the threat of climate change; it’s the threat of inaction. If we don’t, do you know the right things now, as we said, you know the best time to start working on these things. It’s a great big, beautiful tomorrow if we start doing things today.
CB: Absolutely. So, Jim, the outlook for the next 12 months, you mentioned the global feedstock study and we’re hoping for 10 billion tons of fun in putting that together over the coming 12 months. But what does the future look like for you at the moment?
JL: Well, I think that we’re going to be seeing a lot of action at the policy level, led by India and Brazil at the G20 level over the next 12 months. You may see, depending on, there may be a change of administration in a couple of countries. And always with a change of administration, you have a risk of, you know, some of that policy instability that just creates that, this calls to inaction. But the good news is that the technologies that have come forward are incredibly demonstrated and now available, affordable, reliable and scalable. So, we’ve solved so many of the technology problems. That doesn’t mean that every single technology has been scaled, but enough of them have been scaled that if we solve our feedstock cost problems, pretty much our problems are cost and availability problems, most of our problems will go away. We have companies like Comstock that are talking about 140 gallons, which is about 530 litres per ton of biomass. That is a really, really high yield. That’s a drop in fuel. So, that, that kind of.. that kind of productivity is what is what we needed to make things work. So, the technology, I think are pretty much there. We just need a lot more work on feedstock. So, that’s our challenge over the next 12 months is to make sure not just that we know whether there are 10 billion tons and where it is, but we get to work on making sure that we can move it, as you said, rightly so, at the at the outset, that densification is a problem and uniformity is a problem. I think densification is less of a problem in my view, as long as we turn it into some, we build the infrastructure to move it, or we turn it into something that can use the existing infrastructure. And then we have the problem of uniformity. I think if you gasify everything, your uniformity problems go away. Solids to liquids convert. We have a solids liquids conversion problem. And you know it’s hard to do. But we do not have a solids to gas conversion problem nearly on the same scale. And a lot of those are much more solvable. And once we have it in gaseous form, I think it’s easier to move. And that’s something that hopefully we’ll, we’ll take on.
CB: Nah, Jim. That’s a terrific note to finish on. And thank you for joining us on a quick annual tour of the bio economy, and we’re poised for success. We just need more feedstock, and we need shoulders to the wheel with a little bit better marketing story.
JL: That’s, those are the big takeaways. We’ve got to sell it. And we got to acquire it effectively at a price that our consumers are able to afford. And if you…I’ll leave you this way, that we need sustainable, affordable, reliable, available, low carbon extractable and um and efficient feedstocks. It spells out Sara Lee and we have an old product in the United States called Sara Lee. And the old saying was, ‘nobody doesn’t like Sara Lee’. I’ll leave you with that, that if we get Sara Lee feedstock, nobody won’t like it. Well, won’t not like it.
CB: Sara Lee feedstock sounds like the acronym of the year.
JL: Yep. There you go.
CB: Great, Jim, thanks for joining us.